Windows Phone 8: Already Time to Worry?

by Brad Moon | December 21, 2012 7:00 am

Windows Phone 8: Already Time to Worry?

It’s been out for only a few months, but is Microsoft’s (NASDAQ:MSFT[1]) Windows Phone 8 platform already in trouble?

Anticipation was high for the software giant’s renewed assault on the mobile phone market. With Research In Motion’s (NASDAQ:RIMM[2]) BlackBerry plummeting in market share, Nokia’s (NYSE:NOK[3]) Symbian operating system being phased out and Apple’s(NASDAQ:AAPL[4]) iOS and Google’s (NASDAQ:GOOG[5]) Android locked in a battle over the top spot, the time seemed right for a resurgent Microsoft. Amed with a brand new, modern mobile OS, it was poised to make a run for third place.

Despite the hype, an extensive launch campaign and high-profile flagship devices like Nokia’s Lumia 920, Windows Phone 8 has seen more than its share of bumps.

First, those Lumia phones ran into problems when reviewers complained they were too heavy (especially compared against Apple’s super-slim new iPhone 5[6]), and then Nokia got caught faking the 920’s vaunted pureView camera technology[7] in its advertising. While Nokia’s issues had nothing to do with Windows Phone 8, having Redmond’s premier launch partner — which was dropping its own mobile OS in favor of Microsoft’s– struggling so publicly cast a bit of a pall over the entire platform.

Things haven’t got much better since the October launch.

Nokia is about to be surpassed by Samsung as the world’s biggest manufacturer of mobile phones after 14 years at the top. Computerworld and other publications piled on an iHS iSupply report that suggests it was Nokia’s decision to bet the future on Windows Phone 8[8] that cost it the crown.

BlackBerry, which many had written off, is showing signs of life. RIMM’s long-delayed BB10 operating system and new smartphones have a Jan. 30 launch date[9], and the previews look promising. For all its missteps in the past few years, RIMM is still holding on to third place in mobile OS marketshare (albeit at a greatly reduced 4% or so).

If BB10 manages a successful launch in 2013, the Canadian smartphone pioneer could mount a comeback and make Microsoft’s job that much tougher. That would force it to wrestle market share from iOS and Android rather than having a shot at the low-hanging fruit of customers finally abandoning their BlackBerrys.

A few days ago, Bloomberg reported that HTC was halting work on a large-screen Windows 8 mobile phone because Microsoft’s operating system lacked support for high-resolution displays[10] (it’s limited to 720p, or 720 horizontal lines). With smartphone displays only getting larger, this technical limitation means big-screen Windows smartphones would look inferior compared to Android-powered versions that support 1080p.

Having a major hardware partner back off on Windows Phone 8 development because of such a glaring technical limitation doesn’t look good.

Perhaps the biggest blow was Google’s diss of the platform last week, when it announced it wouldn’t bother to release its popular apps — Gmail, Google Drive, Google Maps and others — for Windows Phone 8. Remember, this is the company that wants its apps everywhere, no matter what platform they’re on. It’s fighting tooth and nail to keep its apps on archrival Apple’s iOS platform[11].

But the Google Apps product manager quoted in Computerworld put things rather bluntly[12]: “We are very careful about where we invest and will go where the users are but they are not on Windows Phone or Windows 8.”

Is there a counterpoint to the early Windows Phone 8 doom and gloom? Microsoft CEO Steve Ballmer recently went on record saying Windows-powered mobile phones are selling at four times their 2011 pace[13]. The Windows Phone Store has grown to a respectable 120,000 apps. And the same IDC report that put Windows at a mere 2.6% of smartphone market share for 2012 is predicting a 11.4% share by 2016.

Obviously, we’ll have to wait to see how things play out. The success or failure of BlackBerry in 2013 as the alternative to iPhone and Android will play a big roll in Windows Phone 8 adoption. But if IDC’s forecast holds true, Microsoft may yet get back in the game, at least in the long run.

As of this writing, Brad Moon didn’t own any securities mentioned here.